Sellers, Don't Count Your Chickens Yet

Just in the last few days, we've started to see homes in Greater New Haven come back onto the market, after a sale fell through.  When we think about how many offers now are made without contingencies, in order to improve a buyer's chances of winning a multiple bid situation, the percentage of DFTs (deal fell through, as we call them in the trade) is actually higher than it appears.  People who made contingency-free offers did not always leave themselves wiggle room to get out of a contract, so that the sellers likewise couldn't get out.  Those contracts would therefore be sticking, meaning that the 80% or so of sales with contingencies are producing 100% of the DFTs.

Why would that be happening?  There is always some amount of buyer's remorse. That house you were bidding on the night before doesn't seem as great in the light of day.  However, it is likely that more homes are coming back onto the market because the buyers can't perform. Either they can't borrow enough money--maybe they bid too high in the last round of negotiations, or maybe they never had quite the credit they thought they did--or it's just coming at higher rates, as rates are inching up.  Sometimes it's fees, or flood insurance, or repairs that will cost more that ends the deal.  

In weaker markets, many of those contracts would be adjusted downward by both parties, especially if there are major defects that come to light, or if the home doesn't "appraise out" at the price being paid.  That can easily happen in a rising market, because appraisers can only use closed sales, so current contracts at higher amounts can't be counted.  In this time of short supply, the sellers are more likely to put the house back on the market, and try to resell it at a comparable price.  

When one house has this problem, it can also cause a domino effect, where several homes each depend upon the buyers selling their previous house.  One transaction can ripple through other sales. Even if a sale sticks, a lower price may lower the equity available for the next purchase.

What does all this mean?  It means that the market is beginning to show the downside of rising prices, where buyers face hard upper limits on what they can pay.  Sellers should remain flexible, roll with the punches, and not get greedy.  A deal that seems too good to be true may be just that.  If everyone works together, a good result may occur for all parties.

Home is Where the Gratitude Is

At Thanksgiving time, it's traditional to count our blessings.  Especially this year, people who live in places they love are grateful for that, since they are spending more time there than ever.  As the weather gets colder, and more time is spent indoors, it becomes even more important.

Thousands of years ago, and lasting almost to the present, a house was something you built yourself.  Most didn't move far away from where they were born, and families were close by.  These days, a family can be far flung, and only gather sometimes.  That makes it even more important for a home to be a gathering place that attracts friends and relatives.  

Second houses can fulfill that need as well.  Particularly when they are in vacation locations, they can become the center of seasonal activities,  year after year.  Connecticut, especially with its long coastline, is well suited as a locale for family gathering places.  Woods and water make for great recreational possibilities for all ages.

Greater New Haven is even more attractive for both primary and second homes, with commuting options and easy access from major cities along the Northeast corridor.  Prices here have not risen the way some other places have seen, making it more affordable for buying now.  While supply is tighter than it has been for a long time, there are still houses for sale at various price points.

The holidays are a wonderful time to make memories, and think about making future ones.  If you love where you live, you are lucky!  If there are features you wish you had, room you need for sheltering your pod, or outdoor space you crave, now is the time to plan for next year.

If where you live now sparks joy, as Marie Kundo puts it, then you are lucky.  Enjoy your home, and practice gratitude, for you are in a place that will do more than serve as shelter.  If you just moved, settle in.  If you have lived in one house for many years, revel in the many memories of good times you've had there.

If living somewhere different is on your wish list, now is the time to do something about that. Planning will help us all to get through this isolated season, and give us something to look forward to in the future.  Why not use this time to dream, and dream big?  Whether you are increasing your down payment by staying inside this winter, or fixing up your current house for sale, focusing on the next step will improve your present state of mind.

Whichhever situation you find yourself in, we hope that your holidays are healthy and safe.  And we'll be here to help, when you are ready to act. 

Your New Neighbor May Be from New York

 My new next-door neighbors are from New York.  They just moved in, and they are planning to telecommute from the shoreline. They have high-level jobs that can be done remotely, for the most part. They have little children, and no idea what schooling will be like in the near future.  They have bicycles, a boat, a pool, and a new second car.

My husband and I also have one adult child (accompanied by a boyfriend) sheltering with us.  They are also telecommuting from New York, with good jobs, now being performed remotely.  They aren't sure when their offices will reopen, nor whether they will soon--or ever--have to be physically present in those locations.  They have new exercise routines, new athleisure wear, new cooking accessories, and new disposable income from no rents, no bars and restaurants, and no travel.  They have started looking at houses online, and near us.  Many people we know have similar stories.

Our friends, many of whom are retired or working remotely, are planning ahead to spend time in another part of the country this winter, if they haven't already decamped to a vacation home.  They are renting for months at a time, and testing out possible retirement locations. Rather than use hotels, or try to travel, they are opting for staying put elsewhere, to have a change of venue safely.

You may have relatives, friends, and neighbors like this as well.  Over 10,000 New Yorkers changed their addresses to Connecticut in the second quarter of this year alone.  Anecdotally, we are seeing lots of real estate activity from out of state, and many NY license plates on the roads.  We all know that the pandemic is current, but it's somewhat of a surprise that more permanent choices are being made so quickly.  It's been great for our business, and it will be good for Greater New Haven as well. New Haven proper, although a city, is low in density compared to other places, and remains very attractive for those who want both proximity and outdoor space. After long years of population decline, it's nice to be trendy again!

What does this mean for the real estate market in our region?  Supply, which was already slim, is even tighter.  Prices, which were inching up, are moving more quickly in that direction.  Time on the market is declining.  All of this puts sellers in the driver's seat, and advocates for selling--or even renting for a season or a year--soon.  

Every Segment of the Market is Different

Not only is it hard to judge the quality of the Greater New Haven market by looking at national trends, you have to know town (and neighborhood), plus price range, in order to make a prediction about how quickly a property will sell.  Multiple offers are common on well-priced homes in towns without enough supply, and they are much more likely in price ranges frequented by first-time homebuyers.  And those price ranges are different where?  You guessed it-town to town, and neighborhood to neighborhood.

Even those parameters may not explain everything.  We've seen waterfront property fly off the market lately, mostly in the $1 to $2 million dollar category.  Some of that is by neighborhood, but I think it has more to do with the length of time since the last hurricane on our immediate coastline, plus the consequent lower prices we have been experiencing, which eventually have reached compelling levels.  If that's not squishy enough, there's also the stock market to consider-volatile markets, especially when they are high, tend to lead people to divest stocks and buy real estate.  That's both because they suddenly have more disposable cash, and because they are looking for a tangible place to put it.

All of this is by way of saying that you cannot simply look at Boston or NYC, and conclude that we must be a blend of those two markets.  One is hot, although cooling on the multi-offer scale (Boston), and the other is suffering from oversupply at the top end and a new mansion tax.  What to do?  Read local, shop local, and use a local Realtor!

Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Madison you can say “If market conditions do not change and if no new listings come on the market it will take 7.0 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



What Makes a Neighborhood?

We recently talked at a meeting about trends in neighborhood preferences among buyers.  The average first-time homebuyer is a millennial, and the average buyer is a Gen Xer.  For a long time, people thought that those groups would only live in cities, and only commute on foot, by bike, or by public transportation.  It seems now that that's not entirely true, but there are some real differences that our agents are seeing in Greater New Haven.

Once younger buyers have children, they care a great deal, as did their parents and grandparents, about school quality.  They also tend to prefer more space, both inside and out.  Unlike their parents, however, they want to spend less time commuting, maintain less in the way of house and grounds, and live in a setting with shops, restaurants, and parks.  That's what is meant by the new "walkability" scores that show up on real estate websites.  People want to be able to get milk, see a neighbor, or arrange a play date without getting into a car. 

We are seeing this show up in New Haven, for instance, where East Rock now seems almost suburban to buyers, but has sidewalks and foot traffic everywhere, with coffee shops and other neighborhood attractions and institutions.  Most people drive many places, but want the freedom to walk children to school, or sit on a front porch and converse with passersby.  It's a feeling of safety in numbers, but also of community.  Bigger homes on bigger lots that are farther apart appeal to a different group, smaller in number, that want to entertain, love the spacious feeling of older homes built in a bygone era of grandeur, and want backyards and big gardens.  They also like walking places, but crave more privacy. 

In the suburbs, we see the same trends playing out. Spring Glen, with its high walkability score, is selling quickly.  On the Shoreline, houses and condos near the Guilford Green are at an all-time premium.  There is a second reason for this, which is that older buyers also care about walkability and convenience, and they also want less space and smaller lots to maintain.  The two groups compete for the closer-in properties along the Shoreline, although the smaller homes in East Rock are still large, and attract mostly growing families. 

This means that there is a large supply, almost everywhere, of the biggest homes in a town.  Some of that relates to taxes, but just as much to lifestyle.  Whether busy with young children, or free to travel more, buyers are choosing smaller, sometimes cheaper, and always as walkable as possible.  So, if that's the type of home you own, think about now as a good time to sell!

Interpreting Statistics

Yesterday's news for real estate in Connecticut was that unit sales for residential properties rose by 23.9%.  That's the biggest single increase in a few years.  However, the median price of a home dropped by 7.2%, which was also the biggest change in several months.  What can we learn from that, and what are they measuring?

First of all, they aren't usually,in reports like this, looking at the same property being sold and resold.  Some, like the Case-Shiller index, take the value of all of the real estate together in one city, and compare it to the total value in another period.  Others aggregate lots of individual sale prices, but it still isn't apples to apples; that is, it's not the same house being sold at the first period mentioned, and again at the second.

Therefore, most such data can be skewed by the type of properties sold in the greatest amount.  In this case, it's most likely because first-time homebuyers, lured by low interest rates and family formation, are out in greater numbers than high-end buyers.  We know that this is true in general, because the loss of GE alone is causing very high inventory over a million dollars in Fairfield County.  We also would suspect this explanation, due to the constant news about the weakness of Connecticut's economy, and the flight of older, wealthy taxpayers to states with estate tax rates that mirror the Federal ones (which is almost everywhere else).  We also would think this distribution is likely because the first-time homebuyers are driving the market in other states as well.

So what does this mean for the value of an individual home?  Well, it's good news in the sense that demand for homes in general will drive up prices over the long run.  In the short run, it's anecdotally true that most homes purchased within the past ten years are selling for the same or less than they were bought for then.  However, many factors could influence this.  How much work has been done to the home?  Exactly what micromarket is it in, and what's the supply there?  How has the neighborhood changed over the past decade?  Where's the buyer coming from, and how quickly does she/he need to move?  How quickly does the seller need to  move, and how much equity does he/she have? What are the other terms of the sale?

So, as with most things, the final answer is "it depends".  However, the robust demand is cause for celebration!

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Hamden you can say “If market conditions do not change and if no new listings come on the market it will take 4.2 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



Have Buyers, Need Listings

OK, so we officially don't know when the hot times in our market start and stop. We had a slow (weather-related) winter last year, a very late spring, then a roaring summer, which screeched to an abrupt halt in August, and never returned. Now we are seeing big increases in buyer traffic to our sites, and people looking for houses that aren't yet on the market, even though it's freezing cold and it snowed yesterday. So the market is different year by year, and can only be predicted in arrears. The real takeaway here is that buyers are out now--in early January--and we have little or nothing to show them. Sellers, here is your chance! If your home is well-maintained and well-priced, you might get your best results by listing right now. There's no need to wait until spring, when more competition gets listed, especially since Yale and Yale-New Haven Hospital make their employment offers before spring even starts. Why wait? Get a jump on your 2015 goals, and call us today!

Counting Down (or Up) to June 2006 Levels

Although the real estate market everywhere is on the mend, we in Connecticut are proceeding toward normal at a slower pace.  The high for prices in our region occurred in June 2006.  At last report, our median sales price was still 23% below that peak.  Since most of the country is within sight of their previous high, people in our area are among the lucky few who can continue to buy at lower prices.  Even if you are selling, those who are trading up would gain more from buying at those levels than they would lose from selling at current prices.  When you combine the present cost of mortgages with the sales figures, it remains a great time to buy.

And there's even one more factor in include, which improves even further the current climate, and that's the state of the Greater New Haven rental market.  We have the lowest vacancy rate in the country right now, and that tilts the equation even more toward the buying side.  Rental rates have gone up 50% in the period where sales prices have declined 23%, making us one of the clearest examples across the United States of a place where rent vs.buy decisions are so stark.  So don't kick yourself later.  Do it now--buy that property!

Greater New Haven Regional Update

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Should you list your home early this year?

We are finding that levels of available listings in certain areas and price ranges are uncommonly low these days.  Most people wait for a spring market to list their home, thinking that most buyers are looking then, so their chances are greatest for selling at a good price.  Although this is true, there is another alternative, especially for homes that are in less than perfect condition, or in less than optimal locations, and that is to list when there isn't much competition.  Homes that are listed when someone needs or wants to buy will stand out if they are in a smaller number of new listings.

This is particularly true in our market, as we are so dominated by educational and medical institutions.  Those places work on a different calendar than most of private industry, and their season for making offers is earlier.  That means that, in Greater New Haven, early February kicks off the spring market for faculty and doctors beginning on July 1st.  That is substantially different from what sellers read in national media reports, where May 1st begins prime selling season.  Since buyers in our area are out sooner, they are searching when a smaller pool of choices is presented to them, and they may view new properties to the market more favorably than a bigger group of buyers would view one of a much bigger group of new listings, later in the year.  Many buyers tell us that they are expanding their parameters due to short supply, and a short timeline.  Your home can be considered, when it normally would not be, by those who need to make a move now.

What does that mean for sellers in our region?  If you've been thinking about selling, and you don't have a lot of work to do to your property before you list, you might consider listing in the next month, and having your home exposed to buyers from around the country, who are looking now to move in May or June, instead of the traditional July or August.  If you do have work to do, don't wait another minute.  There is always more to do than you think, and it always takes longer than you think to complete.  (Another advantage to listing sooner:  Workmen are easier to hire in the off season.)  Take advantage of time, and make it to your advantage.  Act now!

Mixed Signals

The latest issue of the Commercial Record illustrates our current problem for sellers and buyers.  If you look at New Haven county for June, the most recent month available, compared to the same month last year, sales are down by 12% and prices for the whole county are up by almost 6%.  If you look just at the shoreline towns and add Woodbridge, to try to capture the higher end of the market, sales are slightly up and prices are down.  Go figure. 

I guess the lesson as a whole is that we can't pay too much attention to what we read in the national press.  Connecticut is following its own, slower, path to recovery.  Our listors at the high end of the market are beginning to accept that there seems to be a ceiling on prices for luxury homes, and that no one can say what a given home is "worth".  We can predict that it won't sell for what the seller thinks it should, given what money is in the house and what the condition is, but we can't find examples that will pinpoint the exact price.  We can't even promise that it will sell at a lower price, nor can we swear that we're not "making a market" by lowering prices, causing low prices to slip lower.  What can we say?  We can tell buyers that it's a great time to buy direct waterfront, or properties over a million dollars.

In other submarkets, the picture is murkier.  The numbers of months of supply in houses has declined, and is now in the range of a balanced market.  That should mean that neither seller or buyer has an advantage.  But, depending upon where you are, and the type of house you have, you could find a bidding war or few showings, with maybe a lowball offer.  However, the only way to test the market is to put the property on at a "fair" price and see. 

There is a bump every fall, when buyers try to close and move before the end of the year, and, this season, it may tell the final tale of 2013.  Let's see what happens.  We do know this--mortgage rates, over the long run, matter much more than a few thousand dollars here or there in the sales price.  So buyers should definitely act, because interest rates have already gone up about 15% from their lowest point, and will likely rise further after the elections.  Time is fleeting--carpe diem!

Prices Holding Steady

When we look at the real estate market statistics from last year in Greater New Haven, we don't have much to crow about. All around, it was a blah year, made that way mainly after the tax credits expired in June. However, one thing that is surprising is that the prices didn't go down as much as you might think. Our Guilford office had a mean sales price only 1% or so down from 2009. Our market as a whole was down about 2.9%.

Those figures don't jibe with what the average person on the street thinks. Why is perception so different? One reason is that many things didn't sell at all, and, if they did, they had been reduced one or more times before they went under contract. Also, as we must always point out, these statistics are not the same as in other industries, because the same homes aren't selling every year. Therefore, the particular mix of homes could change, although that is less true when you look at numbers over a whole year. So it could have been that the home that sold for $330,000 in 2010 was as good or better than the average $340,000 one from the year before.

What the numbers do show is that people went for value. Properties that sold were in good to excellent condition, in established neighborhoods, and were priced to sell. Buyers tended to feel that they were in the driver's seat, and could choose among a broad range of options (which, as I've discussed before, was less true than they thought--another example of mistaken perceptions trumping reality).

What does it bode for this year? Value is still important. Basic conservatism will still prevail. Sellers who don't have to sell will still not sell unless and until they can avoid steep cuts. Buyers will continue to be fussy. But, finally, the market will improve. Maybe slowly, but clearly. And we can't wait!

Second Quarter Results

We just released second quarter statistics from the Greater New Haven region, which showed a major uptick from the same quarter of last year. Of course, the homebuyer tax credit was expiring, so there was a rush to close units while that was still in place. Also, however bad the economy still is, there is some national sense that things are better than in 2009, and the base of comparison was therefore low.

Within the region, Guilford and Woodbridge had the highest prices, with Madison coming in third. Prices generally went down from the second quarter of last year to the first quarter of this year, and then climbed in the second quarter of this year. Unit sales went up more sharply, rising 20% from last year's second quarter through this year at the same time.

It would be interesting to know how many of the sales were from properties which have been on the market for a long time, languishing at high prices, where a price reduction sparked an offer. Anecdotally, we know that many of the stories we hear involve sellers who are finally putting things on where they will sell. They are helped in their efforts by mortgage rates, which are so low that they allow for buyers to feel that they are getting a good deal, based on monthly payments. A recent article in a national paper suggested that buyers are trading up as a way to lock in cheap money. Let's hope so!